After 8 Years, Krakatau Steel Has Finally Made A Profit

Illustration. (Photo: Krakatau Steel)

JAKARTA - A state-owned company engaged in steel production, PT Krakatau Steel (Persero) Tbk managed to achieve a net profit of 74.1 million US dollars in the first quarter of 2020. This issuer coded as KRAS shares has finally recorded a profit in the last 8 years.

President Director of KRAS Silmy Karim said the improvement in the company's performance in the first quarter of 2020 was mainly due to a decrease in cost of revenue by 39.8 percent and a decrease in general and administrative costs by 41.5 percent.

He also said that the company had taken several steps to improve the business that had been carried out since 2019 and the results were starting to show in the first quarter of this year. Some of the efforts that have been made by KRAS to improve performance include restructuring and transformation programs.

"One of the positive results that we have achieved is a reduction in mains operating costs down 31 percent to 46.8 million US dollars compared to the same period in 2019," he said in a written statement received by VOI, Friday, May 29.

He added that KRAS's positive performance in the first quarter of this year was inseparable from the company's success in making efficiency. In early 2020, KRAS was able to increase employee productivity through a workforce optimization program. In January 2020, work optimization increased by 43 percent compared to the current year in 2019.

In addition, the use of energy, consumables, utilities, fixed costs and spare parts decreased. So that the total cost reduction in January 2020 reached 28 percent when compared to the same period the previous year. Meanwhile, the cash to cash cycle also experienced a 40 day cycle acceleration or around 41 percent in December 2019 compared to the period throughout 2018.

"Due to efficiency efforts, Krakatau Steel has succeeded in saving costs of US $ 130 million in the first quarter of 2020. However, conditions in the second quarter of 2020 are predicted to be different due to the weakening of the steel market by around 50 percent due to Indonesia's economic conditions. who are under pressure due to the COVID-19 pandemic, "he explained.

According to Silmy, the weakening of the national economy has had an impact on the steel industry. If this continues, it is expected to have an impact on KRAS performance in 2020.

In connection with the impact of COVID-19 on the steel industry, Krakatau Steel as a strategic BUMN with the support of the government strives to keep the downstream industry and industrial users operating.

The steel industry is the "Mother of Industries" which has a very broad multiplier effect, especially in terms of job availability, reducing dependence on imports, and increasing the competitiveness of national industries.

Silmy added, as a result of the impact of COVID-19, it is highly likely that if this situation drags on and we do not take anticipatory steps, the downstream industry and user industry will close their production lines due to low utilization.

This is very risky because the characteristics of the industry require time to start the production start-up process and this condition will create a gap in the entry of imported products which can lead to a deficit in the national trade balance.

If the industry has died, it will be difficult to revive it because it takes extra effort and can take a long time and cost more to restore it. This condition will be even worse if the domestic market is already filled with imported products.

"We hope that the economic conditions in the third and fourth quarters will improve, so that Krakatau Steel can reap profits as it did in the first quarter of 2020 and this year Krakatau Steel can book profits as planned after the completion of the restructuring of Krakatau Steel," he concluded.